iPhone takes third of smartphone profits

Apple's iPhone has propelled the company to the heady heights of a 32 percent share of the smartphone sector profits - at only 8 percent share of revenue.

If you thought that the iPhone was a licence for Apple to print money, you'd be right: recent figures have shown that the Cupertino company's foray into the world of smartphones in punching well above its weight. We're big fans of Apple's wonderphone here at bit-tech, and it seems like we're far from being the only ones.

As reported by CNet, analyst Toni Sacconaghi of research firm Bernstein Research is claiming that the iPhone has lead Apple to take a whopping 32 percent of overall profits in the smartphone sector - certainly nothing to be sneezed at for a first attempt at a handset.

While the profit figures are impressive, it's not until Sacconaghi compares it to revenue that things get mind-boggling: the company's 32 percent share of overall sector profits comes despite being responsible for a mere 8 percent of overall revenue.

Sacconaghi's report, quoted in an article on the AllThingsD site, states that Apple's soaring profit margins come as a direct result of the integration between the handset and the company's digital download App Store service which has "established a formidable smartphone ecosystem, which history suggests is very difficult [for rivals] to overcome."

Sacconaghi ends the report with a bit of advice for Apple: while its 'formidable ecosystem' might help it to grow turnover faster than the industry average, a drop in price - and in those clearly impressive profit margins - would "expand its addressable market opportunity." The analyst certainly has a point: the report shows that Apple's average margins on the iPhone are a whopping 40 percent - double that of companies including Research in Motion (20.7 percent) and Motorola (21 percent), and almost four times that of Nokia (11.3 percent).

Do you believe that the iPhone could enjoy total ubiquity if only Apple's margins weren't so high, or would a drop in price hurt the company's plans and high-end image? Share your thoughts over in the forums.

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15 Comments

I'd always take things like this with a pinch of salt. How on earth has he come to these figures? Does he know how much it costs each of the manufacturers to make their phones? Does he know how many iPhones Apple have actually sold, because their famous for being very cagey about actual sales figures. How is he even defining a smartphone? Throw the Nokia 5800 into the mix (which is arguably a smartphone) and suddenly the iPhone doesn't look so unbeatable. Working in the market research industry really opens your eyes to the amount of pure bullshit that gets spread around.

Originally Posted by oaskedWhat I'd like to know is just what the total market share of smartphones is..... I know everyone has them in California, but how about in the real world?

Personally, I know few people who are prepared to dump so much money into one.

Their actual market share is pretty damn small. There is a topic on the news section of the guru3d forums. I'm on my Blackberry (heh, irony) at the moment, so finding it would take too long (I'm also at work!), but I will link it later if you want.

Originally Posted by SkiddywinksTheir actual market share is pretty damn small. There is a topic on the news section of the guru3d forums. I'm on my Blackberry (heh, irony) at the moment, so finding it would take too long (I'm also at work!), but I will link it later if you want.

Way to introduce an enormous amount of bias into the article. For instance, "certainly nothing to be sneezed at for a first attempt at a handset." Really? I was under the impression they were on their third of fourth iteration of the iPhone. Just because their business philosophy involves simple trademarks that are all-encompassing does not mean multiple versions can be lumped into a single release.

I would also be interested in viewing the third-party reporting company that provided many of the statistics listed.

Marketing and Propaganda at it's finest. Pay a company to produce inflated results, spread such reports around, and let the viral effect of the internet push the agenda around, and when it's all said and done, the original company doesn't have to be held accountable, but gets the publicity anyhow.
But I guess that's the way of the world.

How does this 'propaganda' suggest anything other than the fact that Apple can charge such high premiums for their phone? I love my iPhone but this report doesn't make me enjoy using it any more, it just reveals how much I've had to pay to use it. Way to fail

why do these articles keep calling the iphone a smartphone?? the thing cant even send data through bluetooth, let alone multitask.

Also I have to ask... 32% of which smartphone sector? the US only? Nokia holding abut 40% of the cell market, with samsung and Sony close behind (all three being actual smartphone makers), i highly doubt that apple's profit margins even come close to the top 3 of the cell world.